COMMENT-BoE DMP survey to maintain division within MPC

The latest Bank of England Decision Maker Panel survey (DMP) for December will likely keep the committee divided on the rate outlook.

For the more dovish members, they will point to the continued fall in inflation expectations, in which the 1-3 year ahead expectations on a three-month average basis fell 4.3% and 3.1% — from a prior of 4.6% and 3.2% — respectively.

However, policy hawks will continue to cling on to the lack of progress made on wages, with year-ahead expectations for wage growth rising 0.1ppt to 5.2%.

Alongside this, the hawkish dissenter, Catherine Mann, who also voted for a 25bps hike at the December meeting had previously flagged price pressures stemming from firms' expectations being a key input into the rationale for voting in favour of higher rates.

With expected price growth over the next year remaining at 4.4%, this will further support Mann's call for an additional rate hike.

On the whole, the DMP survey backs up the BoE's cautious wait and see stance on rates. Given that markets have near fully priced in a rate cut by May, a key focus will be on whether policymakers endorse that narrative. For now, it appears unlikely, which in part can lend support to sterling.

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